AVCANADA

Jetsgo's Leblanc blasts WestJet, Nav Canada

Price-cutting blamed for failure

With files from Lisa Schmidt, Calgary Herald
The Canadian Press

March 18, 2005

Jetsgo founder Michel Leblanc took direct aim at rival WestJet on Thursday, painting the Calgary airline as the main bad guy in the demise of his own discount carrier.

"What we didn't incorporate in our business plan is that we would be spied upon, that people would lie about us and gossip about us," Leblanc told The Canadian Press in a broadside aimed squarely at WestJet chief executive Clive Beddoe.

Leblanc, whose company filed a $50-million suit against WestJet last fall for alleged corporate espionage, said his rival's tactics were the single biggest factor in Jetsgo's downfall last week, which threw 1,325 people out of work.

Leblanc agreed his airline's prices were low but said every time Jetsgo tried to raise fares, it was undercut by WestJet.

"Whoever thinks the guy who has 10 per cent of the market is the price leader is making a mistake," he said.

"They spent a fortune to keep the prices down and keep us from being profitable. My feeling is that the Competition Bureau slept on that issue."

In the interview, Leblanc showed a report by an airline analyst based on a meeting with WestJet officials, who cited rumours that Jetsgo had sold airplanes for cash and had missed payroll and payments to suppliers.

The Jetsgo president said this was all false.

Beddoe was not available for comment.

Leblanc did acknowledge in the interview, however that he himself has to "bear the whole blame" for Jetsgo's demise.

"I'm the guy where the buck stops and I accept that."

Leblanc also fired a salvo at Jetsgo's creditors, saying they were too quick to torpedo a restructuring plan that was in the works and would have involved the sale of some aircraft.

Leblanc said he was preparing to sell five Fokker 100 jets, which he said would have raised more than $10 million, and cut back on routes, to avoid bankruptcy protection.

An estimated 17,000 airline customers were left stranded when Canada's third-biggest airline abruptly halted operations at midnight last Friday, just before the annual spring school break in Ontario.

Leblanc, who used the interview to apologize to passengers for leaving them in the lurch, blamed Nav Canada, one of Jetsgo's creditors, for trying to seize some of his planes last week even though he insisted the airline was not behind in its payments.

On the Monday before the shutdown, Leblanc and Nav Canada, the corporation responsible for air traffic, negotiated a reduced payment that forestalled the seizures.

A Nav Canada spokesman said Thursday that Jetsgo had a "substantial default," and still owes the corporation $1.6 million.

Leblanc, however, said Jetsgo was well within Nav Canada's policy of $4-million exposure, "but they decided to be extremely drastic," he said.

"When you have issues with a creditor you deal with it and come up with a reasonable arrangement. You don't put a gun to their head and shoot."

Speaking out publicly for the first time since he pulled the plug on the airline, Leblanc said he is deeply sorry for the abrupt shutdown that cast him as a villain in many people's eyes. Jetsgo was carrying an average of 280,000 people a month with 29 planes.

"Very clearly, I have deep sorrow for the people whose plans at school break were shattered, but we didn't have any choice," Leblanc said.

He cited safety reasons as the main reason for not providing any warning.

If Jetsgo had tried to put itself under bankruptcy protection first and laid off some employees, Leblanc said some flight crews and mechanics might have refused to work, putting the airline's schedules and safety at risk.

"That's not conducive to a reliable operation," said Leblanc. "We -- management and me personally -- could just not ensure a safe and reliable operation; we thought the best way of approaching it was to cease operations at that point."

The company has been granted a month under court protection to come up with a plan for creditors. Leblanc said he hopes to salvage some of it.

The airline's main assets are its 15 Fokker 100 aircraft; the other 14 MD-83 Jetsgo aircraft were leased.

Asked what he lost in the airline, Leblanc quipped: "Some of my health and about seven million bucks."

Leblanc founded Jetsgo with the proceeds from the sale of Royal Airlines to Canada 3000. That large charter airline went bankrupt shortly after, in late 2001.

Leblanc, 58, who has started and managed a string of airlines in Quebec, did not rule out a comeback.

"I love the airline business; everybody knows that. To be back, you need an opportunity, a plan, a customer base. It's not there as we talk today, but who knows?"

© The Calgary Herald 2005